Morgan v. North Coast Cable Co.

• Decision Date: 11 March 1992
• Docket Number: No. 91-58,91-58
• Citation: 586 N.E.2d 88,63 Ohio St.3d 156
• Parties: MORGAN, Appellee, v. NORTH COAST CABLE COMPANY et al., Appellants.
• Court: Ohio Supreme Court

Page 156

63 Ohio St.3d 156

586 N.E.2d 88

MORGAN, Appellee, v. NORTH COAST CABLE COMPANY et al., Appellants.

No. 91-58.

Supreme Court of Ohio.

Submitted Jan. 15, 1992.

Decided March 11, 1992.

SYLLABUS BY THE COURT

As a general rule, a stranger to an attorney-client relationship lacks standing to complain of a conflict of interest in that relationship.

On April 9, 1987, appellee, Rick Morgan, filed a complaint in the Court of Common Pleas of Cuyahoga County against appellants, North Coast Cable Company, North Coast Cable Limited, a partnership ("limited partnership"), and Lee C. Howley, Jr. Howley is president of North Coast Cable Company, and the company and Howley are the general partners of the limited partnership.

It appears that Morgan was hired by appellants to assist them in obtaining the right to operate a cable television system in the city of Cleveland. In his complaint, Morgan alleged he was not compensated for the services provided to appellants. Morgan sought recovery against appellants based upon theories of unjust enrichment and fraud.

Appellants answered Morgan's complaint and filed a counterclaim. Appellants alleged that Morgan conspired with others to induce the Cleveland City Council not to ratify the proposed cable agreement unless substantial sums of money were paid to Morgan, and that Morgan's conduct was, among other things, a breach of good faith and fair dealing.

Approximately a year after Morgan filed his complaint, Morgan's original counsel was replaced by Jack Schulman of the firm of Schulman & Schulman. Prior to this change in counsel, Schulman had represented the ELRA Group ("ELRA") and its president, Gerhard Hanneman, in litigation against appellants. During the course of the ELRA case, appellants and ELRA stipulated to various orders of confidentiality limiting the disclosure of discovery. Eventually, appellants and ELRA settled the case. The settlement agreement contained a provision requiring that ELRA, appellants, and their respective attorneys keep the terms of the agreement confidential. As a result of the settlement, Hanneman and his wife, and Schulman, along with two other members of Schulman's law firm, acquired interests in the limited partnership. Schulman's and his coworkers' interests amounted to slightly less than one percent of the outstanding interests in the limited partnership.

Appellants filed, under seal, a motion to disqualify Schulman as Morgan's counsel, alleging that a conflict existed between Schulman's personal financial interests and the interests of Morgan, that a conflict existed between Morgan's and Hanneman's interests, and that Schulman would be called as a witness in the case. By letter dated July 29, 1988, appellants advised Schulman and members of his law firm that in light of Schulman's representation of Morgan, appellants would not transmit certain confidential information to Schulman or his firm regarding the partnership.

Morgan submitted a brief in response to appellants' motion to disqualify Schulman. Attached to the brief were the affidavits of Morgan, Schulman, and Hanneman. The thrust of the affidavits was that Morgan and Hanneman waived any conflict that could arise by virtue of Schulman's representation of Morgan, and that Morgan and Hanneman consented to such representation.

On January 31, 1989, the trial court granted appellants' motion to disqualify Schulman as Morgan's counsel, citing two grounds:

"(1) Plaintiff['s] counsel will be a witness giving admissible evidence. DR 5-102(A)

"(2) A conflict between the attorney's financial interest of a former client with the interests of his current client."

Morgan appealed. The court of appeals reversed the judgment of the trial court and remanded the cause. The court of appeals determined that appellants lacked standing to complain of any conflict of interest with respect to Schulman's representation of Morgan. The court reasoned that appellants were "strangers" to the attorney-client relationship and, as a general rule, "strangers" do not have standing to complain of a conflict of interest. The court of appeals explained that "[o]therwise, the Canons of Professional Responsibility would have included the disclosure of conflicting interest to and consent of all parties, not just that of the client, in order to obtain an effective waiver to representation where this is a conflict of interests. See DR 4 and 5 [sic ]." The court further determined that even if appellants could assert standing, Morgan and Hanneman have adequately waived any conflict of interest.

The court of appeals also found that DR 5-102(A) is not applicable because Morgan informed the trial court that Schulman would not be called as a witness on Morgan's behalf. The court determined that the trial court's order most closely relies on DR 5-102(B), since appellants have filed a counterclaim and, therefore, to disqualify Schulman as a witness prior to the parties' exchange of meaningful discovery would be premature.

The cause is now before this court pursuant to the allowance of a motion to certify the record.

Schulman & Schulman and Jack M. Schulman, Cleveland, for appellee.

Gold, Rotatori, Schwartz & Gibbons Co., L.P.A., William P. Gibbons and Richard L. Stoper, Jr., Cleveland, for appellants.

DOUGLAS, Justice.

The issue before us is whether the court of appeals properly concluded that the trial court erred in disqualifying Schulman as counsel for Morgan. Based on the facts of this case, and for the following reasons, we affirm the judgment of the court of appeals in all material respects.

Typically, courts do not disqualify an attorney on the grounds of conflict of interest unless there is (or was) an attorney-client relationship between the party seeking disqualification and the attorney the party seeks to disqualify. See In re Yarn Processing Patent Validity, Celanese Corp. v. Leesona Corp. (C.A.5, 1976), 530 F.2d 83, and cases cited therein; see, also, Dana Corp. v. Blue Cross & Blue Shield Mut. of Northern Ohio (C.A.6, 1990), 900 F.2d 882. ¹ Many courts that have dealt with the issue of whether disqualification of counsel is proper have looked to their respective codes of professional responsibility for guidance. Our research indicates that courts in Ohio are not an exception to this practice.

Specifically at issue in this appeal is DR 5-101(A), which provides that "[e]xcept with the consent of his client after full disclosure, a lawyer shall not accept employment if the exercise of his professional judgment on behalf of his client will be or reasonably may be affected by his own financial, business, property, or personal interests." (Emphasis added.) DR 5-101(A) establishes a two-step procedure to be followed prior to counsel's accepting employment. Counsel must fully disclose all conflicts to the client and the client must thereafter consent to the representation. The Disciplinary Rule, however, does not require that counsel obtain, in the event that a conflict exists, consent from all parties involved in the litigation. Thus, based on the foregoing, we hold, as did the court of appeals, that, as a general rule, a stranger to an attorney-client relationship lacks standing to complain of a conflict of interest in that relationship.

In their first proposition of law, appellants argue that an attorney-client relationship is not a prerequisite in order for a party to the litigation to seek disqualification. Specifically, appellants assert they have standing to seek disqualification of Schulman due to his duties, obligations and responsibilities as a limited partner. In support of their contention, appellants cite Greene v. Greene (19...